Was The Smart Money Right About NextEra Energy (NEE)?

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards NextEra Energy, Inc. (NYSE:NEE).

NextEra Energy, Inc. (NYSE:NEE) has experienced a decrease in hedge fund interest of late. NextEra Energy, Inc. (NYSE:NEE) was in 61 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 64. Our calculations also showed that NEE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Matthew Hulsizer of PEAK6 Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to view the new hedge fund action regarding NextEra Energy, Inc. (NYSE:NEE).

Do Hedge Funds Think NEE Is A Good Stock To Buy Now?

At the end of the fourth quarter, a total of 61 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NEE over the last 22 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Ken Fisher’s Fisher Asset Management has the number one position in NextEra Energy, Inc. (NYSE:NEE), worth close to $1.0065 billion, amounting to 0.8% of its total 13F portfolio. The second most bullish fund manager is Citadel Investment Group, managed by Ken Griffin, which holds a $191.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish encompass Cliff Asness’s AQR Capital Management, D. E. Shaw’s D E Shaw and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Ecofin Ltd allocated the biggest weight to NextEra Energy, Inc. (NYSE:NEE), around 12.06% of its 13F portfolio. Engine No. 1 LLC is also relatively very bullish on the stock, setting aside 6.27 percent of its 13F equity portfolio to NEE.

Because NextEra Energy, Inc. (NYSE:NEE) has witnessed declining sentiment from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of fund managers that slashed their positions entirely in the fourth quarter. Intriguingly, Ken Griffin’s Citadel Investment Group dropped the largest position of the “upper crust” of funds monitored by Insider Monkey, comprising about $64 million in stock. David Costen Haley’s fund, HBK Investments, also dumped its stock, about $14.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 3 funds in the fourth quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as NextEra Energy, Inc. (NYSE:NEE) but similarly valued. We will take a look at Texas Instruments Incorporated (NASDAQ:TXN), Honeywell International Inc. (NYSE:HON), United Parcel Service, Inc. (NYSE:UPS), Union Pacific Corporation (NYSE:UNP), Bristol Myers Squibb Company (NYSE:BMY), Linde plc (NYSE:LIN), and Shopify Inc (NYSE:SHOP). This group of stocks’ market caps are closest to NEE’s market cap.

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As you can see these stocks had an average of 69.7 hedge funds with bullish positions and the average amount invested in these stocks was $3862 million. That figure was $3078 million in NEE’s case. Bristol Myers Squibb Company (NYSE:BMY) is the most popular stock in this table. On the other hand Honeywell International Inc. (NYSE:HON) is the least popular one with only 45 bullish hedge fund positions. NextEra Energy, Inc. (NYSE:NEE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NEE is 39.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and surpassed the market again by 1.6 percentage points. Unfortunately NEE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); NEE investors were disappointed as the stock returned 1% since the end of December (through 4/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

Disclosure: None. This article was originally published at Insider Monkey.

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